Sirius wins with Howard Stern

Tom Brennan · 01-27-2006, 03:21 AM

"Sirius Wins with Howard Stern"
From USA Today
http://www.usatoday.com/news/opinion...rs-stern_x.htm

I'm not a fan of Howard Stern, but I think the executives at Sirius satellite radio are shrewd businessmen. They might be paying Stern hundreds of millions of dollars over a five-year period, but a little math shows they'll easily make their money back ("Stern says he'll avoid 'foul language,' " Life, Monday). Why?

Stern's audience is predominantly male, and boys and men love gadgets. They love the latest technology and techno-speak. I can see Stern's fans enjoying telling their baffled womenfolk that Sirius' streams are broadcast from three satellites in an "elliptical geosynchronous orbit."

Stern's vast fan base is known to be exceptionally loyal to him and will follow him wherever he goes. That's another reason why Sirius is onto a winner, no matter how much the cost.

My prediction is that Sirius is in for a big pay day with Stern. The doubters will be eating their words, and Stern won't have to watch his anymore. But Sirius is not interested in letting "freedom ring"; it is interested in letting its cash registers ring "cha-ching."

Steve Mozena, Carson, Calif.

Garrett Lundy · 02-11-2006, 02:08 PM

They should just change the name of the product to Stern Satellite radio.

Kevin N · 02-12-2006, 12:46 AM

His guess is stupid. Sirius still loses, optimistically, about $150 per add. Using simple accounting, that means they'd have to have almost 3.1 million subscribers add and stay on for 2 years to break even. That's assuming that all $13 go to paying for Stern, which obviously isn't the case.

IMO, Sirius will never make back the money they spent on Stern.

Brent T · 02-12-2006, 08:54 AM

Hey Kev...

670K Subscribers (in 3 years of service) before Stern announced he was coming to Sirius, 4 million now.. Was it Martha Stewart or Richard Simmons that brought them all in ?

Now lets do the math

Lets say that Stern only brought in 2.5 million subscribers and that NOT 1 more subsriber will come to Sirius because of Stern.

That means that in one month Stern brought in 37.5 million in subscriber dollars, in 12 months he brought in 450 million, this doesnt include advertising dollars either for his channels which do charge a premium.

Now his deal was a reported 500 Million (which was not in cash) so please explain how signing Stern wasnt an incredible deal ?

Guess it wasnt as great of a deal as the NHL deal for XM at 100 Mill...

Kevin N · 02-12-2006, 01:11 PM

Ok...2.5 million subs...let's do the math

(2.5m subs * $311 for 2 years of sub each) - (2.5m subs * $150 lost on each add)

$777,500,000 - 375,000,000 = $402,500,000

Howard's payday - money from subs

$500,000,000 - $402,500,000 = $97,500,000 loss for Sirius.

I would do the math for if they all stay for just the first year, but trust me, it's ugly.

Just for kicks, here's the math for the NHL on XM.

$100,000,000 = ($311 for 2 years of sub) - $100 lost on each add

$100,000,000 = 211x

XM has to add 473,934 subs due to the NHL in the next 10 years to break even.

MLB...

650,000,000 = 311x - 100x

XM has to add 3,080,569 subs in their 10 year MLB contract to break even. I think XM overpaid for MLB, but at least they get a good amount of advertising for it.

Oprah...

55,000,000 = 311x - 100x

XM has to add 260,664 in the next 3 years to break even.

**HTF Ads**

Ernie Estrella · 02-12-2006, 02:15 PM

All of this stuff is still in its infancy. I think the numbers you have to see are the staggering jump in subscriber count Sirius has made in the 4th quarter of 05 and how many more will add to the beginning of 07.

The spike was obviously going to be high. It's up to Howard to keep the men AND women (there's more female listeners than most think) to keep coming back. I think the notion of satellite radio is still untapped to most people. The concept of paying for radio, much less $13 is still a foreign, even insulting idea. But Howard can and will bring the curious in and once people get a taste of satellite radio, they never turn back.

Tivo had similarly modest beginnings. We can say Howard will be a gain/loss all we want, but I think time can really be the only proof of what is true.

I know based off of his movie, two best-selling novels, and his cable shows that he finds his audience quickly and loyally. He's been underestimated every step of his career and everytime, EVERYTIME, he's proven doubters wrong.

XM can have the jump on equiptment, but it's programming that will keep you in the hunt. Oprah will be as much of a presence on her channel as much as Ellen Degeneres-- which is almost non-existant. Look at video games systems. Playstation and XBox continue to sell well. Not because of the unimaginable tech specs of the machines, but because they produce games that people want. Nintendo and anyone else are left in the dust. Howard is a wanted commodity, and he's exclusively on Sirius now. That makes the demand for Sirius high.

Even after a year which I believe Sirius will close the gap on subscribers, there's still 4 more years on the initial contract and will determine if people want to keep going. You will have hardcore fans who will gladly pay for all five years, maybe even lifetime subscriptions. The potential is there. To deny it would be idiotic. Only time will determine if it's really a loss for Sirius and how they'll use Howard and the revenue from Howard's fans to propel them forward.

In looking at the deals that will bring it mass audiences (50,000+ subscribers) with any of these deals, the Nascar deal, NFL, NBA, for Sirius. MLB for XM.will be the big movers. Oprah/Ellen vs. Martha are pushes. Eminem and Snoop are pushes. In fact most of the music are pushes because each company treats the music like no other venue outside of the Internet. To me, Sirius, despite the money they're putting into programming has more programming that people want and people will flock to that over the long haul.

Kevin N · 02-12-2006, 03:22 PM

Quote:

The spike was obviously going to be high. It's up to Howard to keep the men AND women (there's more female listeners than most think) to keep coming back. I think the notion of satellite radio is still untapped to most people. The concept of paying for radio, much less $13 is still a foreign, even insulting idea. But Howard can and will bring the curious in and once people get a taste of satellite radio, they never turn back.

The difference is that Howard used to be something that people could stumble upon, and he picked up listeners that way. With no marketing reach outside of Sirius anymore, lest he start a bit about midgets who are into beastiality and play it live over the air, he only has the ability to pick up Sirius listeners who decide to give him a try. Sirius added a ton of subs because of him in Q4 and probably will have a bunch of early Q1 additions for him too. After Q1, Stern subscriptions will, logically, plummet..

Quote:

ivo had similarly modest beginnings. We can say Howard will be a gain/loss all we want, but I think time can really be the only proof of what is true.

You have no idea how much I love TiVo, but aren't they pretty close to bankruptcy, or being bought? Not that it's the same situation at all, really.

Quote:

Oprah/Ellen vs. Martha are pushes.

There's no way Oprah is a push with Marth Stewart.

Quote:

To me, Sirius, despite the money they're putting into programming has more programming that people want and people will flock to that over the long haul.

That's a huge assumption based off of a personal opinion.

Chris · 02-12-2006, 04:39 PM

Quote:

There's no way Oprah is a push with Marth Stewart.

Oprah is a push with anyone. I'd say Oprah is less of a marketing push then OutQ gay radio on SIRI, less of a push then.. hell, Arena Football.

People can get Oprah in their homes FREE.

She has her TV show which they can watch (free)
and she has her own television network (Oxygen) which has terrible ratings (see the ad revenue value) and most can get that.

So, where is the big demand for more Oprah content? She won't be doing a radio show at all, instead, like Ellen, they will be re-broadcasting her TV show on the radio.

You know, I may not be a fan of Howard, or Opie & Anthony, etc. but I do respect the fact that they are "radio people". All serious radio talent, whether they are Rush Limbaugh, Howard Stern, Jim Rome, etc. they all have a "show" with content designed for radio and they work a production. Oprah is not going to set down for a radio program.

I'm just unsure of what kind of draw I picture Oprah being. Is she a draw? I think somewhat. But do people sit and say to themselves "I HAVE to have XM because I can listen to Oprah TV repeats?" I just can't see it. Based on Oxygen's TV performance, I just can't imagine it.

Same goes to Martha Stewart, and others.

I can honestly see people buying XM saying "I am an NHL fan, I will follow the NHL" or buying XM to say "I am an O&A fan, I'll follow them" Or Dr, Lara. etc. Because those are shows BUILT on radio listeners. It's hard to build a radio show on a TV personality who will never be there. This is why I think Martha Stewart and Oprah were not so hot business deals for either company. Neither appears on their own networks, and their content is not really radio friendly. It's hard for people driving around to sit and think about the food preparation advice or an hour long James Frey apology.

I can see people buy SIRI for NFL, Stern, Basketball, College University coverage in areas, OutQ, etc.

I'll take two sets of programming with cult followings and make this contention:

OutQ (gay radio) on SIRI is worth more to them as listeners then Stewart or Winfrey.

Air America is worth more to XM then Stewart or Winfrey.

As an aside: I don't listen to either network, so I can't comment on their quality, but I know they were formats designed for the radio that do have a loyal radio audience. And thus, you get people to follow them.

Oprah pitching a radio on her show will attract some people.. but once they realize that it's just a repeat of her television show and then content basically pawned off from Oxygen network, you have to wonder how long they'd stay when they already get that shit free.

Kevin N · 02-12-2006, 05:23 PM

Quote:

Oprah is a push with anyone. I'd say Oprah is less of a marketing push then OutQ gay radio on SIRI, less of a push then.. hell, Arena Football.

You're nuts.

Quote:

She won't be doing a radio show at all, instead, like Ellen, they will be re-broadcasting her TV show on the radio.

She'll be doing a weekly 30 minute radio show. I didn't respond to anything else since you had your facts wrong.

Chris · 02-12-2006, 05:34 PM

Quote:

She'll be doing a weekly 30 minute radio show. I didn't respond to anything else since you had your facts wrong.

She'll be doing a 30 minute show once a week, 39 weeks out of the year, pretaped, at least according to Forbes. So, Mea Culpa on that. As to the other, we will wait and see. The numbers for Oxygen are straight from Advertiser's Buyer's Guide, Q4 2005. If you want to know the dollar rate on the advertising buy for her cable network, I can give you those figures